USDA loans are a popular option for rural homebuyers due to their low interest rates and no required down payment. However, they include a funding fee that helps sustain the program. Understanding how this fee impacts your loan can help you make informed financial decisions.
What Is the USDA Loan Funding Fee?
The USDA loan funding fee is a one-time charge paid at closing or financed into the loan amount. It is used to support the USDA loan program and ensure its sustainability. The fee amount varies based on the loan type and down payment, if any.
How Funding Fees Affect Your Loan
The funding fee increases the total amount borrowed, which can lead to higher monthly payments. Borrowers have the option to pay the fee upfront or include it in the loan balance. Paying it upfront reduces the overall loan amount but requires more cash at closing.
Funding Fee Rates
- Standard rate: 1.00% of the loan amount
- For borrowers with a down payment of 10% or more: 0.50%
- Veterans or active military members may be exempt
The fee is subject to change based on USDA policies and borrower circumstances. It is important to verify current rates before applying for a loan.